The Worst Global Economy of Our Lifetimes

For months, we have been writing of the “worst global economy of our lifetimes” – no matter where you live, or how old you are. Yes, the destructive power of unfettered money printing, market manipulation and propaganda in its purestform – like crack cocaine, or “Love Potion #9” for 1980s movie junkies – has attempted to put lipstick on the world’s biggest economic pig. However, the unprecedented “deformation” it has caused – economically, politically, and socially – is causing catastrophic global ramifications; which mathematically, cannot be unwound until the fiat House of Sand it lies upon completely implodes. Which clearly is occurring now – as no matter where one looks, ironclad evidence that the “end of belief Central banks can save us” is visible, for more and more of the world’s seven-plus billion denizens to see.

I mean geez, how can anyone not be terrified at this morning’s “words of wisdom” from one of the most powerful bankers on the planet, German Finance Minister Wolfgang Schaeuble – in espousing what the Miles Franklin Blog has warned of, to mainstream jeers, for the past decade?

“The normalization of monetary policy (i.e., raising rates or reducing QE) is a big risk – that almost leads to the conclusion that we’re in a situation like a drug addict.”

Yes, a drug addict – which perfectly describes the urgency to print more money once a fiat currency Ponzi scheme is launched. And why, like the movie Fargo, once you start down that unsavory road, the end result – of death to all parties involved – is guaranteed. Or, as Peter Schiff likes to analogize; like the Black Flag “roach motel” – i.e., “roaches check in, but they can’t check out.” This, my friends, is what the world’s financial “leaders” have sentenced us to – in which the only path to salvation includes unprecedented, catastrophic “withdrawal symptoms,” which must occur before the world can even dream of economic health.

Again, I cannot emphasize how rapidly the fragile, running-on-fumes mirage that has prevented the inevitable, all-out collapse of global financial markets is dissipating – as with each passing day, comments like Schaeuble’s are prevalent, from increasingly influential figures – causing more and more people to take notice. Heck, Chinese Finance Minister Lou Jiwei – easily, as influential as Schaeuble and Janet Yellen herself, on Sunday called for the U.S. to “assume its global responsibility” by maintaining interest rates at zero; whilst permanent FOMC voting member Lael Brainerd followed this thinking last night, in espousing the Fed should maintain zero rates to “watch and wait” for “global risks” to recede. And then there’s perma-dove Charles Evans, President of the Chicago Fed, whose comments below, spanning the past two years, speak for themselves.

Of course, it no longer matters what Central bankers do – or don’t do – as at this point, the global economy has devolved so rapidly, it’s difficult for anyone to pretend we aren’t amidst a crippling worldwide recession. Not to mention, one featuring record amounts of debt and commodity oversupply (as exemplified by crude oil, the world’s largest revenue source) – which can only resolve through dramatic capital expenditure reductions; debt defaults; and in the case of sovereign governments, hyper-inflationary currency devaulations. In other words, a “1,000 year flood” economically speaking, which must wash over the world before it can recede. And using the Noah analogy, the only proven way to survive such a financial calamity is with the “shelter in the storm” physical gold and silver have historically provided.

To that end, in espousing the “worst global economy of our lifetimes,” we are not doing so flippantly. No matter where one looks, the evidence is glaring; but nowhere more so than commodities, where the CRB Commodity Index touched a 40-year low six weeks ago; and despite blatant intervenetion to “save” it, sits just a few percent above said lows as we speak. I mean, we’re talking about the same commodity price levels as in 1974, when the world was nearly debt-free, and the gold standard just three years in the rear view mirror. Since than, untold tens – or perhaps, hundreds – of trillions of dollars, Euros, Yen, and Yuan have been printed, yielding an unprecedented debt load that can never be repaid. And adding insult to the “99%’s” injury, real wages in nearly all countries are lower now than they were then. Not to mention, due to said oversupply, most commodities are doomed to plunge further – certainly in real terms – particularly those most heavily exposed to the largest economic bubble in history; i.e., China; the “most dangerous, destabilizing force on Earth.”

Notice, by the way, how gold and silver are not on this list – as they are perhaps the only “commodities” China is buying – and doing so at an unprecedented pace. Not to mention, how two of the top four on the list – copper and zinc – are where the vast majority of Glencore’s $100+ billion debt exposure lies; and thus, why the newly formed, blatantly transparent “copper PPT” is desperately trying to slow copper’s catastrophic, irreversible descent. And by the way, what better depiction of the aforementioned “dangerous, destabilizing force” China has become than this morning’s news that its imports plunged for the tenth straight month in September, by a whopping 17% year-over-year? Trust me, now that the PBOC has commenced the “cataclysmic financial big bang to end all big bangs” – i.e, devaluing the Yuan – said imports will collapse further, putting not only the world’s commodity producers in grave financial danger, but manufacturers as well, like Germany. You know, Europe’s “strongest economy.”

As for actual economic activity, this week’s plunge of the Baltic Dry Index to its lowest ever level at this time of year says it all – which even perma-bull Jim Cramer claimed, when it hit its seasonal peak this summer, was the market’s “last shred of hope.” For that matter, Cramer has made it abundantly clear that the most important conference call he listens to, in trying to ascertain the direction of global economic activity, is Caterpillar! And then of course, there’s the all-time highs in U.S. inventory to sales; i.e., the “pink elephant” the MSM and Wall Street are desperately trying to ignore, but shortly will be forced to acknowledge

Then, of course, there’s the financial ramifications of so many layoffs, write-offs, and losses – particularly as, just like everything in today’s world of vile accounting chicanery, the vast majority of financial disasters-in-waiting are held “off balance sheet,” like those of not only Glencore, but nearly all “emerging markets.” In other words, an entire world of Enrons, Lehmans, Madoffs, MF Globals, and AIGs – only 2015’s economic and financial backdrop is far worse, and irreversible.

To wit, I last month wrote of how an “accelerating junk bond collapse portends an historic financial crash.” Well, in just the two weeks since its publication, said collapse has expanded – with Fitch dramatically raising its estimate of 2015 bond defaults, and the Wall Street Journal warning of the largest amount of such defaults since…drum roll please…2009. In China – you know, the most “dangerous, destabilizing force on Earth” – the bond bubble is even more egregious than its rapidly collapsing stock bubble; and per what I noted above, the vast majority of Chinese debt is held within the largely unregulated “shadow banking” system, which ultimately the PBOC will be forced to bail out with “QE to Infinity.” FYI, this chart shows how the inverse of the Chinese AAA bond yield – i.e., its price, is at an all-time high, whilst China’s economy and stock market are crashing!

As for Precious Metals, yesterday’s dramatic HUI underperformance was as clear of a signal that a major gold and silver raid was coming as any I’ve seen. And sure enough, the Cartel attacked first in the wee hours of Asian trading, and than at the usual “2:15 AM EST” this morning. That said – what do you know – both metals sharply reversed higher in COMEX trading this morning, as the aforementioned, massive weight of wildly Precious Metals bullish newsflow emerged.

Have we hit “the bottom?” Possibly, and now that a particularly well-read technical analyst has declared the “knockout blow for goldbugs” – no less, just before gold actually bottomed the day before last week’s September NFP report – I’m inclined to think yes. Either way, the combination of monetary, economic, and sentimental factors favoring the risk/reward profile of the only assets proven – over thousands of years – to PROTECT you from financial oblivion has never been stronger, in our view. And if you do consider taking action, we humbly ask you to give Miles Franklin a call at 800-822-8080, and give us a chance to earn your business.

4 Comments

Ivor
on October 13, 2015 at 12:23 pm

Geat stuff Andy – many thanks.

Some of your readers may have invested in metals in the hope that a moonshot will enable them to convert to fiat and clear their mortgages.

If said moonshot occurs due to a dramatic devaluation in the dollar, rather than (for example) a supply shock or a Chinese gold revalution, do you agree that only those with dollar mortgages will be able to do this?

Or will the gold “price” rocketing in dollar terms ignite sufficient global momentum investment to enable borrowers in other currencies to benefit?

Jeremy
on October 13, 2015 at 1:05 pm

Called today to do business. After years of following you and Bill I am now part of the M&F team. Thank you both!!

AL
on October 13, 2015 at 11:41 pm

Excellent as usual Andy. Stick it to em.

Bill Mitchell
on October 14, 2015 at 10:45 am

I does feel like a bottom for PM. Other things? Not so much – lol.

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